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The chart above shows the bear market in the Dow Jones Industrial Average from Sept 1929 to July 1932. It highlights the extent of the bear market rallies which averaged 31.7%

If we exclude the first bear market bounce (the 48% in the 22 weeks from November 1929 to April 1930) as it was significantly different from other bounces both in terms of time and magnitude, the average correction up becomes 27.6% over an average period of 7 weeks

How does this compare to what we have just seen?
The recent rally in the Dow from the low in March this year has been 26.6% in 6 weeks.

The price action and the numbers here suggest to us that we have seen a bear market rally that has likely come to an end.

The Dow has turned from the short term channel top and has formed significant momentum divergence (negative) on the daily chart indicating weakness in the move up.

Dow Jones Industrial Average – The short term rally looks like a bear market correction


A breach of the recent lows in the Dow and the support level at 6,350 would indeed be bearish. Support levels below there are at 5,800 and then 5,180. Note that these levels are not particularly important, simply the next reference points.


The recent rally has been impressive, though no more impressive than the bear market rallies seen in the past. There is little, if anything, on these charts that lead us to think that a major base has been put in. Instead the rally looks corrective and the longer term charts are far more telling…